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CBN Explains Substrations on Deposit Money Banks’ CRR

CBN Explains Substrations on Deposit Money Banks’ CRR

Doris Ukaonu

The Central Bank of Nigeria (CBN) has explained  that the substrations on some banks’ Cash Reserve Ratio (CRR) was not a fine but a deterrent to the affected banks for failing to obey the regulator’s directive on the new lending regime of 60 per cent deposits to them.

This was clarified yesterday (October 3) in Abuja, by CBN’s Director of Banking Supervision, Mohammed Adbullahi, at the end of the Bankers’ Committee’s meeting which had in attendance various chief executives from the Deposit Money Banks (DMBs), and monitors of the financial sector.
According to him, the substrations tallied with the levels of default.
He said: “ It is wrong to say the deductions are fine because the banks are not losing the money to the CBN. The only implication is (that) the amount debited would not be invested in money market instruments by them. Once the affected banks raise their lending to the deposit threshold, their accounts will automatically be credited.
“ CBN never said there is going to be a fine. The circular said at the cut-off point in the event that you don’t meet the threshold, funds would be debited from you and added to your CRR. What you have there is not a fine, neither is it a levy, but a shortfall based on the parameters set by the CBN. It is going to be a continued process.”
CBN’s Director of Banking Supervision further explained that the substractions were embarked on to trigger banks to take charge of their fundamental duties of  financial intermediation, specifically to the real sector which he maintained, had suffered stunted growth and discrimination over the years.
On account of  CBN’s new regulation, Abdullahi said that N860 billion was borrowed by the banks for three months with hopes that profits will be generated in the near future.
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